It would be harder to build car plants and T-shirt
factories, as well as other cross-border pipelines, if President
Barack Obama makes a decision on the proposed 830,000-barrel-a-day line based primarily on emissions from oil-sands
development, Girling said yesterday in an interview at
Bloomberg’s Toronto office. New factories may face reviews based
on their energy sources, he said.

“This has become a precedent for infrastructure in the
U.S.” Girling said. “We’re not going to build any other export
access into the U.S. out of Canada until we resolve this
issue.”

Oil-sands developers are counting on Keystone XL to lift
heavy crude prices by connecting them to the U.S. Gulf Coast,
the world’s largest refining center, as they double production
by 2025. Environmentalists are trying to block the line because
they say it would encourage oil-sands development, which
releases more of the carbon dioxide that scientists say is
warming the planet than extracting some conventional crudes.

Pipeline Punt

Girling said he expects an environmental report from the
U.S. State Department to be released in “weeks, not months.”
The department continues to ask TransCanada questions about the
project, though inquiries have slowed, Girling said. While he
sees a final decision by the end of March, he also said there is
a chance it may be left to the next U.S. administration.

“There is a possibility that this gets stretched out,” he
said. “That very well could happen.”

A glut of oil caused by a lack of transportation options
for Alberta production has led to Canadian heavy crude selling
for $23.50 a barrel less than the U.S. benchmark. Oil-sands
output will more than double to 4.5 million barrels a day by
2025 from last year, according to the Canadian Association of
Petroleum Producers.

Keystone XL won’t be found in the U.S. national interest if
it worsens climate change, Obama said in a June speech. That
test threatens other cross-border pipeline projects such as
Enbridge Inc.’s proposed expansion of its Alberta Clipper
conduit from Alberta to Wisconsin, Girling said.

Enbridge Approval

Canada’s National Energy Board approved Enbridge’s Northern
Gateway oil-sands pipeline from Alberta to the Pacific Coast
yesterday, subject to 209 conditions. The conditions include
liability coverage of C$950 million ($893 million) and a
responsibility to lead research efforts into the effects of
heavy-oil spills in marine and fresh water environments. The
government has 180 days to rule on the project.

TransCanada would consider expanding Keystone XL by adding
pumping stations and twinning portions of the line, Girling
said. The company requires approval of the pipeline first, he
said, declining to specify how big Keystone XL could eventually
get.

“I wouldn’t say it’s infinite, but we can continue to
expand,” said Girling, 51.

Another way to move Canadian oil to the Gulf Coast that
TransCanada may consider is converting its 16,656-kilometer
(10,350-mile) ANR natural gas pipeline to carry crude and
reversing it so it runs from the U.S. Midwest to the Gulf of
Mexico. That would also include connecting the system with its
existing Keystone oil line in Illinois, the CEO said.

Sends Message

“The key issue right now is can you get oil across the
border,” he said. “You have to get across the border first and
then there’s other ways to get to the Gulf Coast.”

Keystone XL is scheduled to begin operating in 2016, four
years after its original targeted start date, after delays due
to environmental opposition. The pipeline needs presidential
approval because it crosses the U.S.-Canada border. TransCanada
requires 24 months to build the line.

A U.S. denial would be a “message to Canada,” Girling
said.

“I’m not sure exactly what the message would be; is that
the relationship is no longer as important as it’s been
historically?” Girling said. “I just don’t think that makes
any sense.”

Obama rejected TransCanada’s initial application after
officials in Nebraska said the pipeline would imperil
ecologically sensitive lands. TransCanada then split the project
in two to build the southern leg that didn’t require a
presidential permit first and reapplied for a rerouted northern
leg in May 2012.

A draft report by the State Department said Keystone XL
wouldn’t cause increased greenhouse gas emissions because
projects in the oil sands, the world’s third-largest crude
reserves, would be developed anyway and transported to market by
rail.